Turning to technology

Turning to technology

AOE’s CEO and founder, Kian Gould, considers how airports can counter travel retail disruption through digitalising their business models.

The way we travel, and shop at airports, continues to evolve, and increasingly technology holds the key to boosting retail sales in this ever-changing environment.

Travel retail is down across the board, with the Asia Pacific region being the only exception – an exception caused only by an increase in downtown duty free sales of nearly 18%.

At the same time, the shopping habits of passengers have changed dramatically, with ‘planned’ purchases now accounting for more than 70% of all sales, while ‘impulse’ purchases have dipped to below 30% – the complete opposite of the traditional buying model.

Add the omni-presence of smartphones and tablets into the mix – there are more mobile devices worldwide (nearly five billion) than toothbrushes (4.2 billion) – and it is obvious that the traditional retailing model of focusing on in-store shopping at airports can no longer deliver the profit margins that airports require to make them less dependent on landing charges.

Airports as digital marketplaces

One key solution to these challenges is for airports to adapt to the changing consumer environment, evolve into digital ecosystems and collaborate with service providers that think outside the box.

These ecosystems combine both the physical and digital worlds to provide customers with omni-channel marketplaces for digital shopping, procuring convenient services and flexible payment options.

Airports that are digitalising their businesses and creating new customer touchpoints, such as Frankfurt, Heathrow and Singapore Changi, are already beginning to see positive effects on both revenues and customer satisfaction.

Airports have three main advantages when digitalising and using e-commerce as a centrepiece of their new business model for generating and growing non-aviation revenue:

Immediate product availability: Many customers still prefer to hold products in their hands, especially pricier ones, before purchasing. A digital marketplace can provide the option for a customer to search and choose an item and then see it in-store before buying.

Low cost of returns: Once a customer completes the purchase, the likelihood of goods being returned in an airport environment is very low, thus decreasing overall costs for retailers.

Low traffic acquisition costs: The costs for acquiring new customers is also lower at airports than in traditional e-commerce or retail environments; major hubs literally have tens of millions of potential, freely convertible, customers.

Of the major stakeholders in non-aviation revenue, something we call the new ‘quaternity’ of travel retail (airports, airlines, duty free retailers and brands), airports are the logical choice as the digital marketplace provider. Why? Because if an airport’s duty free retailer such as Heinemann or Dufry loses the concession, then the airport no longer has a marketplace if that retailer provided it. Similarly, if the airline changes or no longer flies to a given airport, then the marketplace is also gone. Brands come and go as well; the airports are the only constant.

Thus, airports are the logical option as a marketplace provider for generating new non-aviation revenue streams. In this role, they can collaborate with all the other stakeholders under one umbrella to create an omni-channel customer experience.

A future of unobtrusive e-commerce

In this model, the airport becomes a true digital marketplace, providing more than just a retail platform for customers. It becomes the centrepiece of what we call ‘Unobtrusive E-commerce’.

Unobtrusive e-commerce is third generation E-commerce (the first being retailers such as Macy’s and the second being platforms such as Amazon).

The idea behind this form of e-commerce is that customers don’t even notice that they’ve just spent money on something.

For example, say you are running late and are in danger of missing your flight. Your phone asks you if you want to buy a Fast Track service. You confirm with a click – and you’re done. The service is paid for automatically, as people are used to from Uber and similar services.

This is what interacting with the airport should look like. It’s convenient, it’s simple and it offers added value to the airport, all other stakeholders and customers alike.

All of this truly puts the airport into the driver’s seat again. By building a digital marketplace, airports can establish themselves as hubs for customer engagement. In doing so, they can generate significant non-aviation revenue streams, decrease costs and create long-term customer loyalty.